The Banco de España is the Spanish national central bank. It joined the Eurosystem on 1 January 1999, prompting a redefinition of its functions, along with those of the other euro area national central banks. In the case of Spain, the Law of Autonomy of the Banco de España had to be amended to include the European Central Bank’s (ECB) power to define monetary policy in the euro area and its powers in respect of exchange rate policy. It also had to be adapted to the provisions of both the Treaty on European Union (TEU), the Statute of the European System of Central Banks (ESCB) and the guidelines and instructions issued by the ECB.
The Banco de España currently has two areas of activity. First, as part of the ESCB, it performs tasks related to euro area monetary policy and, second, it carries out other functions derived from its status as a national central bank.
As a member of the ESCB, the Banco de España participates in monetary policy decisions in the euro area, issues banknotes of legal tender promotes the proper working of payment systems in the euro area. The Governor of the Banco de España is a member of the Governing Council of the ECB. Banco de España staff also participate in various Eurosystem committees to design and implement monetary policy.
As a national central bank, the Banco de España holds and manages currencies and precious metals not transferred to the ECB and provides financial services for the issuance and repayment of public debt. The Banco de España also prepares and publishes statistics, prepares economic analysis and research studies and advises the Government.
In addition, the Banco de España forms part of the Single Supervisory Mechanism (SSM), a system of banking supervision comprising the ECB and the national competent authorities of the participating European Union countries. The SSM’s main goals are to monitor the safety and soundness of the European banking system and to increase integration and financial stability in Europe.
The SSM is one of the pillars of the banking union, along with the Single Resolution Mechanism Mechanism (SRM), which protects financial stability and the taxpayer. The next step needed to complete the banking union would be a harmonised deposit guarantee scheme to protect depositors throughout the euro area, irrespective of which country they are in.
In this respect, to provide greater cover for euro area deposits, in November 2015 the European Commission proposed to set up a European deposit insurance scheme (EDIS) to protect all deposits in the euro area. EDIS will build on the work of national insurance schemes by guaranteeing deposits of up to €100,000 in any bank in the banking union. If a given bank is placed into insolvency or in resolution, EDIS will intervene to pay its depositors. This will result in a stronger and more uniform degree of cover by minimising the vulnerability of national deposit guarantee schemes to local shocks and increasing trust in the banking system, irrespective of geographical location. The transition to EDIS will be gradual, with progressive increases in the share of EDIS contributions in the event of a bail-out. However, once it has been set up, the protection of bank deposits in the euro area will be fully financed by EDIS.